With the recent marketing of clozapine for "severely ill, treatment refractory" schizophrenic patients, it is clinically important to establish clozapine's role in the treatment of the wider population of schizophrenic patients who fail to achieve optimal benefit from currently available neuroleptic drugs. Specifically, its efficacy and risks for patients in the community who manifest persistent psychotic symptoms as well as poor social functioning remain unclear. The proposed study is a double blind clinical trial comparing clozapine to a moderate dosage of haloperidol in schizophrenic outpatients.This study will extend treatment to 24 weeks, enabling determination of whether longer treatment exposure increases the proportion of patients who improve and the amount of improvement. A 24-week study also extends treatment into the risk period for agranulocytosis, allowing a clearer delineation of clozapine's risk benefit ratio. Finally, the study incorporates measurement of specific cognitive deficits and social skills to guide the future design of social skills training programs that are tailored to the needs and abilities of this population. The same protocol will be followed at three sites (Hillside Hospital, UCLA-Brentwood and Western Psychiatric Institute and Clinic) in order to complete the study in a timely fashion and enhance generalizability to a wide range of patient populations.